House chair criticizes SBA

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The SBA announced it temporarily will allow auto dealerws to useits 7(a) business loan progra to finance vehicle inventory. Many lendere had stopped makingthese so-called floorplan loane to auto dealers. Rep. Nydiaw Velazquez, D-N.Y., who chairs the , fears “therer is a significantly higher risk ofloan defaults” on these floorplan This could force the SBA to increase the subsidty rate for 7(a) loans, which would make the loansa costlier for future borrowers. In a June 2 lettetr to SBA AdministratorKaren Mills, Velazquez noted the SBA had “lonh prohibited the use of its financing programs for the purposw of wholesale lending, and for good reason.
Becausse lenders are limited in their ability to exercise full controk over thefinanced items, the exposure to loss in floorplan loanw is greater than in othe r types of financing.”